Poor Brad DeLong has been beating
himself up by reading Ben Stein again. I do have sympathy
with him: I was happily reading the newspaper myself yesterday, sipping on an
excellent cappuccino from Tarallucci
e Vino, when the Stein
column loomed up in front of me like some kind of car crash I couldn’t turn
Brad’s already dealt with the inflation/unemployment silliness. But in many
ways it just gets worse from there. What does Stein mean, for instance, by this?
If oil, for example, becomes denominated in euros, the price in dollars rises
— perhaps significantly.
Er, no. If Tarallucci e Vino were to start denominating the price of its cappuccinos
in euros, and the dollar continued to fall, then certainly the price in dollars
would rise. But that’s because cappuccino prices are fixed. Oil prices, on the
other hand, are not: they change from day to day and indeed from minute to minute.
At any given point in time, oil has a price in dollars, in euros, in Venezuelan
bolivars, or even in pork bellies, should you be so inclined. If the dollar
falls, then oil might indeed cost more dollars. But that’s got nothing to do
But wait, Stein’s not done yet:
Allow me to deviate from our theme a moment to consider exactly what policy
makers and regulators in Washington might be up to when it comes to monitoring
A new low was suggested in that realm recently by news reports saying that
the Securities and Exchange Commission was considering allowing revisions
to corporate law that would bar stockholders from suing their own managements
in court for wrongdoing.
Instead, corporations would be able to require their owners — yes, their
owners — to go through arbitration instead of court litigation if they had
grievances. To say that this trivializes and betrays the ownership rights
of stockholders is putting it mildly. It’s really a betrayal of capitalism
No, it’s not a betrayal of capitalism, it’s a betrayal of tort lawyers. Shareholders
suing managers is a spectacularly inefficient way of trying to enforce rules
on how people should run a public company. Intra-company grievances between
owners and managers should be worked out in arbitration. Companies
have a real problem with the class-action lawsuits which pop up every time a
share price falls. They have nothing to do with "the ownership rights of
stockholders" and everything to do with those stockholders refusing to
take responsibility for their own investment decisions and wanting a do-over.
Arbitration is a good thing for genuine shareholder grievances, because they
are likely to be settled more quickly and without as much in the way of legal
fees. It’s a bad thing for people wanting to bring spurious lawsuits.
And then there’s the real clincher.
Another thing that preoccupies me, albeit on a slightly smaller scale, is
an enduring mystery of the retail economic world: why don’t people in
New York City want a Wal-Mart in Midtown?
Yes. A Wal-Mart in Midtown. Maybe we could tear down Rockefeller Center
and build one there. Or repurpose the Central Park Zoo as a big-box retailer;
the Sheep Meadow could be the parking lot. Obviously we’d need to give Wal-Mart
the space rent-free, or for maybe no more than a buck or two a foot, because
that’s how the company can offer us its everyday low prices. But doing so would
surely be worthwhile: "every New Yorker needs food and paper towels".
I only wonder how we’ve all managed to cope until now.